Stochastic Dynamic Utilities and Inter-Temporal Preferences

TL;DR

This paper introduces an axiomatic framework for representing dynamic, information-sensitive preferences using stochastic utility functions, inspired by Debreu's state-dependent utilities, with an iterative construction based on inter-temporal relations.

Contribution

It provides a novel axiomatic approach to model dynamic preferences with stochastic utilities that depend on available information, extending Debreu's state-dependent utility concept.

Findings

A new axiomatic foundation for stochastic dynamic utilities

Iterative construction of inter-temporal preference relations

Representation of preferences sensitive to information availability

Abstract

We propose an axiomatic approach which economically underpins the representation of dynamic preferences in terms of a stochastic utility function, sensitive to the information available to the decision maker. Our construction is iterative and based on inter-temporal preference relations, whose characterization is inpired by the original intuition given by Debreu's State Dependent Utilities (1960).